XML 24 R11.htm IDEA: XBRL DOCUMENT v3.20.2
Income Taxes
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Our effective income tax rates were 40.1% and 49.6% for the nine and three months ended September 30, 2020 and (350.6)% and 0.8% for the same periods in the prior year. The 2020 tax rate includes tax benefits from the CARES Act enacted on March 27, 2020 due to the Act's five year net operating loss carry back provision while the 2019 tax rate reflects tax benefits associated with intangible income derived from serving non-U.S. markets. The carry back provisions enable us to benefit from certain losses and re-measure certain deferred tax assets and liabilities at the former federal tax rate of 35%. The tax rates in 2020 and 2019 also reflect research and development tax credits and excess tax benefits related to share-based payments. The year to date tax rate variance is primarily due to low pre-tax income in 2019, resulting in larger 2019 discrete tax rate benefits.
The Company has deferred income tax assets that can be used in future years to offset taxable income and reduce income taxes payable. The deferred income tax assets relate primarily to U.S. federal and state tax jurisdictions. Management has determined, based on the Company's history of prior operating earnings and its expectations for the future, and all other evidence, that future U.S. federal taxable income will more likely than not be sufficient to realize deferred income tax assets. We have valuation allowances for certain U.S. state deferred tax assets in jurisdictions where we have determined it is not more likely than not that future taxable income will be sufficient to realize deferred income tax assets. If, however, our expectations for future income and/or other evidence changes, including assumptions regarding 737 MAX return to service, we may record additional valuation allowances in future periods that may be material.
Federal income tax audits have been settled for all years prior to 2015. The Internal Revenue Service (IRS) began the 2015-2017 federal tax audit in the first quarter of 2019. We are also subject to examination in major state and international jurisdictions for the 2007-2018 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.
Audit outcomes and the timing of audit settlements are subject to significant uncertainty. It is reasonably possible that within the next 12 months unrecognized tax benefits related to federal matters under audit may decrease by up to $680 based on current estimates.